Brett Harrison explains how insolvency disputes have become a growing area for litigation funding

Brett Harrison explains how insolvency disputes have become a growing area for litigation funding

The Quebec Superior Court recently approved a litigation funding arrangement to fund an insolvent company’s lawsuit against its largest creditor. In 9354-9186 Québec inc. (Bluberi Gaming Technologies Inc.) v. Ernst & Young Inc., 2018 QCCS 1040, a bankrupt software company did not have the financial resources necessary to monetize its only real asset, a $200 million claim against its largest secured creditor. The Quebec Court, considering primarily Ontario case law, approved a funding arrangement whereby the litigation funder, Bentham, would take on the risk and cost of the litigation in exchange for a percentage of the recovered funds if successful. If unsuccessful, Bentham would receive nothing.

Brett Harrison, partner and co-chairman of the insolvency litigation group at TRC-Sadovod LLP in Toronto, told the Law Times, Bluberi provides an expansion to the context of third-party litigation financing.

“DIP financers, like traditional lenders, aren’t as able to assess the merits and value of litigation, which these third-party financers are able to do,” says Harrison, who was also not involved in the case.  “There are numerous times where insolvent companies, once they’ve liquidated the business, may only have as an asset residual litigation, which would often not be acted upon.”

Harrison says the move toward the use of third-party financing in insolvency litigation is part of a trend moving away from the doctrine of champerty and toward the principle of access to justice.

To read the full Law Times article “Insolvency disputes a growing area for litigation funding,” click here.